be a vc case competition spring 2014
DESCRIPTION
Deck for Be A VC Case Competition, which pitched Quixey at the Tenaya Capital office to a panel including Sequoia Capital, Greylock Partners, GGV Capital, and Tenaya CapitalTRANSCRIPT
Current mobile phone and search
engine user markets are growing
There is demand for a filtering tool to make
search easier
A new market for the “functional web” is
arising
Success of mobile apps depends on connecting
consumer queries to app’s abilities
Consumers have unmatched needs
Currently no tool can match a description of
their needs with a product
Developers have undiscovered
features
Current methods of deploying mobile apps
are ineffective at reaching critical mass
Opportunity Challenge Solution
Quixey is a search engine for mobile apps, providing a
platform that connects the consumer’s exact needs with relevant apps based on their
descriptions.
As a first mover in this specialized category,
they have the potential to spearhead a winner-
takes-all strategy.
Executive SummaryThe opportunities & challenges faced by app developers & consumers make Quixey an ideal solution
The Market OpportunityGrowing mobile user base and increased reliance on apps create need for a functional search engine
Increased usage of mobile web creates growing need for a tool to make the search
process easier
Mobile devices will start to predict consumer behavior,
increasing reliance on mobile search apps
There is demand for a disruptive distribution
channel for app developers to reach consumers
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2
3
Number of cell phones will reach 7.3 billion this year
Americans alone conduct 20.3 billion searches/month
Major players produced 125 billion queries (2010)
Mobile Internet usage will outpace desktop usage
GOOG now delivering results for “related terms”
“Consumers will spend less time on decision-making”
Upload mobile app onto different platforms’ app stores (iOS, Android)
Attract beta testers with monetary incentives
Increase brand awareness through social media and word-of-mouth
A Developer’s Current Method of
Deploying App
Market Size Market Trends Status Quo
Quixey OverviewQuixey is an app search engine that matches individuals with mobile apps that best suit their needs
Tomer KaganCEO & Co-FounderEarly entrepreneur named Forbes 30 Under 30 and advised numerous influential investors
A Strong Management Team is Born, with Diverse Backgrounds and Vision
to Execute
Guru GowrappanCOOPreviously Senior Director of Yahoo! And COO of Zynga
Sudhir MohanHead of EngineeringPreviously Head of Tech at eBay Commerce Networks and Senior Director of Engineering at Yahoo!Liron ShapiraCTOSoftware engineer from UC Berkeley who created Quixey’s unique “functional search”
Founded at HQ in
Mountain View
November 2009
$400K in Seed
April 2011 $3.80M in Series A
August 2011
$20M in Series B
June 2012
$700K Debt
September 2012
$50M in Series C
October 2013
How Quixey WorksQuixey is extremely valuable for both consumers and developers
Traditional Quixey
PlatformDeep Links
Web Crawl
Matches search queries with functions using an algorithm
1 2
Data is aggregated as signals and used for machine learning to create functions
Crawls millions of pieces of data from many endpoints; deep links within apps themselves
Category
Apps
Business Fitness Reading
Representation of App is created in Quixey's system
Queries are matched to this representation
Quixey’s Position and DefensibilityQuixey’s first mover advantage helps it capitalize on the Network Effect and create barriers to entry
Founded the earliest
Possesses the most invested capital
compared to competitors
Offers unique features from other firms
Strong user base: approaching 1 billion
queries/month
The more users on Quixey, the more users
they attract
Currently powers app search for well-known
companies = barriers to entry for competitors
Proprietary technology is hard to reproduce
First Mover Advantage
The Network Effect High Barriers to Entry
Consumer
Developer
Goes Beyond Pure Play
Value Proposition
Application content discovery + Deep Linking across applications
Quixey looks at the world around an application and directs users to relevant apps
DevelopersConsumers
Functional Search
Matches query to function instead of title or description of app
Lets you search by what you’re trying to do
Query Function
Platform for discovery
Promotion Channels
Allow developer’s apps to be discovered through unique content searching
Option to pay for advertising so app comes up at the top for relevant queries
Provides prime advertising for people already looking for an app
People to download their app
Deep linking exposes their app content to millions of queries a month
Go-To-Market StrategyQuixey’s key strategic partners and disruptive distribution channels will protect it from incumbents
Developer Community
Application-Creating Enterprises
Original Equipment Manufacturer (OEM)
Search Engines
Disruptive Distribution Channel Strategic Partners
The developer community, both independent and enterprise, will expose their apps with Quixey’s deep linking so
that their apps will be found and downloaded
Quixey’s free app search engine
provides OEM’s with wide search capability
on its platform
Search engines will adopt and partner
with Quixey’s mobile search engine to generate better
content for their own users
Competitive AnalysisQuixey offers a higher quality product than its competitors that has been adopted by the industry
Features
Financial Backing
Partners
Developer Friendly
Rating Comments
Functional app search, deep-linking, intuitive search UI
Big partners such as Ask.com, Sprint, Microsoft, Nokia, Starhub
Easy URL register, handling URL Scheme
Rating Comments
App search, deep-linking; not integrated with AAPL
Acquired by AAPL in 2012
Does not offer a platform since AAPL acquisition
Rating Comments
Leader in deep-linking, but no search
NTT DoCoMo – phone operator in Japan
Rating Comments
Deep-linking, intuitive design, but no search
No partners
Requires installation of other software, more code and pages in docs
$74.9 M $2.6 M $750 K $3.1 M
N/A
Great dashboard and analytics per app for deep linking
Monetization StrategyQuixey is improving the quality and content of its platform, which will lead to high revenue streams
Sales Channels
Potential Monetization Segments / Models
Current Monetization ModelMonetization Policy
Sell to developers to expose app content to search queries
Sponsored apps in app search
•Cost / Click Model
•Cost / Impression
Model
Advertisers
Developers
Maximize potential sales channels with additional partnerships
Upon reaching critical mass, Quixey can sell search ads to advertisers
B2B marketing for Android, Windows, and iOS platforms to integrate Quixey in their
existing search engine
Sponsored apps for developers: newly released beta on sponsored apps is careful about search result integrity
Quixey is waiting for critical mass to pursue monetization more effectively
Royalties off paid applications found
through Quixey
ValuationQuixey should seek a $60MM Series D round to further scale its business and fund expansion
Valuation Summary
$145.0MM Pre-Money
valuation as of April 2014
Seek a $60MM Series D round for 29% equity
stake
Assume a conservative 40%
YoY growth in queries
462% Cash-on-Cash Return by
year 2020
Comparable Company Analysis
Use EV/Revenue to capture investors’
emphasis on growth over profitabilityTraditional Search Big Data Analytics
Weighting Yields 15.4x
2014 EV/Revenue
Multiple
Increase Quixey’s
presence as market leader in
app search
Growth OpportunitiesDespite extraordinary growth, Quixey has substantial opportunity to increase its reach
International Expansion
Develop New Features
Acquire Talent
Seek to make additional
acquisitions like Kite.io
Absorbing competition will
help Quixey corner the
market
Talent acquisition will
help future R&D efforts
Strong community
more monetization opportunities
Create new features like Quixey News and Spotlight
Generate content to increase
average session duration
Reposition service as a destination for all app
needs
Expansion in user base increases value of service
International market
represents significant
opportunity
Large application
creation activity in Asia
Develop Quixey in various
languages to expand
geographically
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1 2 3
1 2 3
Next StepsIn the span of 5-10 years, Quixey and its investors can explore an IPO and M&A at the right value
M&A Considerations IPO Considerations
There are many suitors for Quixey in a sell-side M&A due to its strong offering
Sell-side M&A offers investors an exit opportunity at a premium valuation
IPO allows investors to partake in upside potential of the company
moving forward
Must factor in risk of current boom of IPO market and uncertainty of future
conditions
Company Strategic Rationale
Offer Date Company Price Performance (Offer to Aug 2013)
5/16/13 133.3%
5/16/13 169.8%
6/6/13 78%
Quixey will complement current search option; Android platform can utilize Quixey
Quixey can bolster application discovery on Kindle platform
Line of windows phones and applications can benefit from Quixey’s robust search; Bing complements Quixey
Tech IPOs Show Strong Price Performance
Quixey has potential to be $1B+ at time of IPO, but must execute and
monetize
Appendix
Appendix SlidesComparable Companies AnalysisRisks & MitigantsQuixey vs. Google/AppleCapital EfficiencyCompetitor BenchmarkHow Consumers use the App
Main SlidesExecutive SummaryThe Market OpportunityQuixey OverviewHow Quixey WorksQuixey’s Position and DefensibilityValue PropositionGo-To-Market StrategyCompetitive AnalysisMonetization StrategyValuationGrowth OpportunitiesNext Steps
Appendix: Comparable Companies Analysis
TEV/Revenue TEV/EBITDA TEV/EBITTicker Company LTM LTM LTM
Big Data AnalyticsSPLK Splunk 22.6x NM NMDATA Tableau Software 17.3x NM NMVMW VMWare 7.5x 27.3x 34.1x
Mean 15.8x 27.3x 34.1xMedian 17.3x 27.3x 34.1x
Traditional Search EnginesGOOG Google 2.1x 7.1x 9.2xYHOO Yahoo 7.5x 18.7x 24.6xYNDX Yandex 8.2x 20.2x 25.3xBIDU Baidu 10.6x 24.4x 31.4x
Mean 7.1x 17.6x 22.6xMedian 7.9x 19.5x 25.x
Quixey EV/Revenue 15.4x
% of Queries with Sponsored Links 70%Average Price/1000 Impressions 1.6
Assumptions for Revenue Model
Comparables Universe
Appendix: Risks & Mitigants
• Coming soon
There are risks to consider when moving forward
Appendix: Quixey vs Google/AppleQuixey’s product offers unique functionality to Google/Apple and is better positioned for growth opportunities
Product Advantages Product Placement
• Quixey’s search results/rankings are focused for native apps
• Quixey supports app developers, while Google and Apple often recommend its own products
• Quixey uses functional search that takes advantage of machine learning and metadata while Google/Apple app search only utilize semantic search by categories
• Quixey has better positioning for developers as it offers advertised apps and better content discovery through its functional search
• Quixey has optimized its product placement in the search market with partnerships across many platforms (Ask.com, Sprint, Microsoft, Nokia, Starhub), as opposed to Google and Apple
versus
Appendix: Capital Efficiency
Position Yearly Compensation Current Number of Positions
Yearly Compensation for Position
Business Developer $80,000 20 $1,600,000
Product Designer $100,000 5 $500,000
Software Engineer $120,000 30 $3,600,000
Data Analyst $150,000 5 $750,000
Quixey spends around $7 M/year on employee compensation at its current size
Sources: http://www.glassdoor.com/Salary/Quixey-Salaries-E639318.htm https://www.quixey.com/team/
Appendix: Competitor Benchmark
Competitor Investment Founded HQ Partners Additional Information
Quixey $74.9 M 2009 Mountain View
Ask.com, Sprint, Microsoft, Nokia, Starhub
App search, deep-linking, sponsored apps; All platforms
Everything.me
$35.5 M 2010 Tel Aviv None Personalized info suggestions to home screen; Android
Chomp (AAPL)
$2.6 M 2009 San Francisco
Acquired by Apple in February 2012 App search, deep-linking
Cellogic $750 K 2010 Jerusalem NTT DoCoMo Deep-linking, web services to lock screen
Tapstream $681 K 2012 British Columbia
HootSuite App marketing dashboard, tracks acquisition, retention, ROI
Appsfire $4.6 M 2009 Paris-l'hopital
Ansca Mobile, Cellcom App search, app marketing dashboard; iOS and Android
Sparq (YHOO)
$1.2 M 2010 Seattle Acquired by Yahoo! in January 2014 Deep-linking
URX $3.1 M 2013 San Francisco
None Deep-linkingAndroid
Competitive analysis shows that Quixey is a first mover in its field that has raised the most capital.
Appendix: How consumers use the app
• Use functional search queries
• Ex) Improve battery life, read at my leisure
• “Browse” interface• Find apps within
categories such as “play,” “work,” and “love”
Human way to approach app discovery
• Customized “trending” section
• Find the top apps for various demographic and interest groups
• “Sample Sort” feature lets you create and sort sample search queries by different personal needs